When insurance becomes infrastructure

The article argues that climate risk is turning insurance and takaful into a form of climate infrastructure, not merely a mechanism for paying claims after disasters. Starting with El Niño, it notes that while the cycle is natural, a warmer planet intensifies its effects on water supply, agriculture, electricity demand and floods. Globally, insurance is being reinvented through four innovations: parametric and index-based products that pay quickly when thresholds are crossed; resilience finance that links avoided losses to funding for prevention; underwriting that rewards household and property-level risk reduction; and nature-linked insurance that recognises reefs, mangroves, wetlands and rivers as protective assets. For Malaysia, the article says floods are the obvious entry point. Low take-up of optional motor flood cover, the uninsured losses from the 2021 floods and the stranded property dynamics in Taman Sri Muda show how physical risk can become insurability, bankability and investability risk. Malaysia is not starting from zero, with Bank Negara climate guidance, Perlindungan Tenang, and emerging parametric takaful for paddy estates and solar farms. The core message is that Malaysia should redesign protection before losses occur, balancing actuarial discipline with solidarity, so adaptation becomes a shared market, policy and community project for vulnerable communities.

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This article first appeared in Forum, The Edge Malaysia Weekly on June 22, 2026 - June 28, 2026